Business Recorder (BR) Research
Almost every year, Pakistan textile industry pleads the government to protect them. And this year is no exception either. Once abundantly exporting raw cotton, the industry is now importing the commodity from India.
The latest Pakistan Cotton Ginners Association (PCGA) fortnightly report stated that the arrival of cotton increased by 3.7 percent year-on-year to 13.391 million bales at ginneries in Pakistan as on May 1, 2014. However, initially the government’s production target was 14 million bales, but heavy rains and floods in Punjab last year and pest attack in lower Sindh adversely affected the output.
Over 12.584 million bales of cotton, of the ginned stock, were sold to domestic textile mills, whereas 399,382 bales were acquired by exporters. The Trading Corporation of Pakistan (TCP) has not procured cotton until now during the ongoing cotton season.
Moreover, the ginners are currently holding around 407,816 bales of unsold cotton as against 399,919 bales a year earlier. Most big players in the value-added chain buy their yearly supply of cotton at the start of every calendar year as in the international market, Indian cotton is priced about 5-7 percent lower than Pakistani cotton. Thus, owing to its oversupply conditions, it provides Pakistani cotton traders and brokers a good opportunity to fill domestic appetite by purchasing the Indian commodity.
Reportedly, another reason of lower cotton yield is the use of uncertified seed by the local growers. In contrast, Indian growers are currently using certified BT cotton seed, which has practically tripled the production from 16 million bales to 38 million bales in a few years. Moreover, currently, a total of 12 (11 in Punjab and 1 in Sindh) out of 1,200 ginning factories are operational in two provinces. The power crisis has caused many spindles to shut down.
The Karachi Cotton Association (KCA) has also raised its spot rates by Rs50, to Rs6,550 per maund. According to floor brokers, declining cotton stocks and the likely delay in arrival of new crop, because of dry spell in lower Sindh, have triggered some panic buying from millers.
At the tail-end of the season, with the new crop less than two months away, the government has already forecasted of production increase this season. But then again, going by the track record, analysts consider that it would be better to take these estimates with more than a grain of salt.
